Let’s talk about the Income Cliff
How much was your first ever income? Your first job. It could have been high school, could have been a paper run.
Today in Australia. the average is income is $1312 per fortnight. This is average full time income before tax. It grosses you about $68,818 per year, which is 35 bucks per hour.
I want you to understand that if you’re above that, you’re on above average income, in an above average country. Australia has one of the best wage rates in the world. So a high income in Australia is about $200k. Only about 2% percent of Aussies earn more than two $100 per annum.
The top five best paying industries include:
- Mining ($135k)
- Electricity, Gas, Water ($100k)
- Construction ($81k)
- Wholesale Trade ($69k)
- Manufacturing ($69k)
Incomes change over time and it’s impacted by our age. This is the income cycle. So when you’re under 20, you’re getting on average about $383 a week, and why is that? Well, most people are casual/part time, or studying and doing other things, they may still be living at home.
At that type of income they’re also not much value to the companies that they work in, they don’t come with experience.
Now when you move up around 21-34, you start earning a bit more money. $1127 per fortnight an average, then you get up to 35-54 that’s $1503 per fortnight. So again, that’s you starting to become more of an asset, started become more valuable to the economy and to the company you work for, to yourself. You’ve got skills, you have talent and expertise.
So, it shifts to $1544 when you’re 45-54 as an average. You can see that incomes vary overtime. What we talk about today is your Peak Earning Capacity. So what happens?
When people get there, you’re now on good money, you’re doing OK. People play one of two games in this period of their life. They either play the Comfort game or they play the Wealth game.
Here’s what I want you to understand: money is just a game, the sooner you learn and appreciate that, the better you’ll be with your money.
The question is “what game you playing?”
If I’m playing the comfort game in my peak earning capacity; I may have a roof over my head, bills paid, some money in the bank (maybe 15-20 or 50 thousand, whatever the number is that makes you feel comfortable), you have something set aside so you are no longer stressing about money. But then, you may overreach, live that UberEats life, go on holidays and live the lifestyle you enjoy.
But there’s no financial progress – there is no forward thinking. There’s no concern about the future and there’s no planning. There’s no setting yourself up.
So you can play that game during that period, or you can play the Wealth came.
In the Wealth game you’re also earning better money than you’ve ever earn before but you’re saving more money and you’re putting that money into assets. Those assets are helping you to buy more assets. You are starting to acquire assets, and those assets help you to buy more assets and THEN they help you to start funding your lifestyle and expenses. That’s the Wealth game.
Here’s why you want to pick the right game that you’re playing during that period: most Australians end up on the pension.
Reported income decreases over time, so you start low, you have highs, it levels out and then it plummets over what we call The Income Cliff.
There could come a point in time, in the future, where you earn $500 a week and you don’t want to be sitting there wondering what the heck you did to end up in that position. Or you’re going to have multiple assets, which pay you with income, and that income is going to increase over time. That is the wealth game, which we want everyone playing.